Consumption Inequality and Discount Rate Heterogeneity

Although standard incomplete market models can account for the magnitude of the rise in consumption inequality over the life cycle, they generate unrealistically concave age pro.les of consumption inequality and unrealistically less wealth inequality. In this paper, I investigate the role of discount rate heterogeneity on consumption inequality in the context of incomplete market life cycle models. The distribution of discount rates is estimated using moments from the wealth distribution. I .nd that the model with heterogeneous income pro.les (HIP) and discount rate heterogeneity can successfully account for the empirical age pro.le of consumption inequality, both in its magnitude and in its non-concave shape. Generating realistic wealth inequality, this simulated model also highlights the importance of ex ante heterogeneities as main sources of life time inequality.

Consumption Decisions When People Value Conformity

In this paper we assume that for some commodities individuals may wish to adjust their levels of consumption from their normal Marshallian levels so as to match the consumption levels of a group of other individuals, in order to signal that they conform to the consumption norms of that group. Unlike Veblen’s concept of conspicuous consumption this can mean that some individuals may reduce their consumption of the relevant commodities. We model this as a three-stage game in which individuals first decide whether or not they wish to adhere to a norm, then decide which norm they wish to adhere to, and finally decide their actual consumption. We present a number of examples of the resulting equilibria, and then discuss the potential policy implications of this model.

Evolution and recent developments of Spanish wine sector, 1950-2008

Since the 1980s the traditional European winegrowing regions have been carrying out deep changes in response to the onslaught of winegrowers in the New World. In recent years Spanish regions have been foremost in Europe in terms of change in areas turned over to wine production and distribution. This study analyses the main sequences of changes the Spanish wine industry has undergone: the evolution of consumption through the changes in consumer drinking habits; the leading role of exports in international markets; the spread of different types of marketing and business organization; the distribution in large and small sellers, and the main factors that have been involved in the chain of production and in the modernization of the wineries.

Acute and usual drinking among emergency trauma patients: a study on alcohol consumption and injury patterns.

OBJECTIVE: To investigate the relationship between usual and acute alcohol consumption among injured patients and, when combined, how they covary with other injury attributes. METHODS: Data from a randomised sample of 486 injured patients interviewed in an emergency department (Lausanne University Hospital, Switzerland) were analysed using the chi(2) test for independence and cluster analysis. RESULTS: Acute alcohol consumption (24.7%) was associated with usual drinking and particularly with high volumes of consumption. Six injury clusters were identified. Over-representations of acute consumption were found in a cluster typical of injuries sustained through interpersonal violence and in another formed by miscellaneous circumstances. A third cluster, typical of sports injuries, was linked to a group of frequent heavy episodic drinkers (without acute consumption). CONCLUSIONS: Among injured patients, acute alcohol consumption is common and associated with usual drinking. Acute and/or usual consumption form part of some, but not all, injury clusters.

A Review of Harm Reduction Approaches in Ireland and Evidence from the International Literature

This report examines international literature on harm reduction and also presents primary research in health services in Ireland on approaches to harm reduction. The aim of harm reduction efforts is to minimise the risks stemming from shared use of drug-use paraphernalia, such as needle exchange programmes. One of the criticisms of Irish drug services is that the restricted opening hours and limited number of exchange services may contribute to continued sharing of needles among drug users. The report points out that other non-injecting paraphernalia such as spoons are also associated with the risk of contracting diseases, yet services do not as yet focus on them. The report notes that specific risk factors that contribute to risky drug practices include youth, a shorter injecting history, confinement to prison, homelessness and being involved in a sexual relationship with another intravenous drug user. The report suggests that harm reduction practices can be introduced into a prison population without a subsequent increase in drug consumption rates. The provision of consumption rooms and the prescription of heroin are also discussed, with the report noting that legislation would have to altered to implement these new strategies.This resource was contributed by The National Documentation Centre on Drug Use.

A Structural Analysis of the Health Expenditures and Portfolio Choices of Retired Agents

Richer and healthier agents tend to hold riskier portfolios and spend proportionally less on health expenditures. Potential explanations include health and wealth effects on preferences, expected longevity or disposable total wealth. Using HRS data, we perform a structural estimation of a dynamic model of consumption, portfolio and health expenditure choices with recursive utility, as well as health-dependent income and mortality risk. Our estimates of the deep parameters highlight the importance of health capital, mortality risk control, convex health and mortality adjustment costs and binding liquidity constraints to rationalize the stylized facts. They also provide new perspectives on expected longevity and on the values of life and health.

Rice Consumption in the United States: New Evidence from Food Consumption Surveys, July 2005

Evidence from recent U.S. food consumption surveys provides new information on the distribution of rice consumption, the characteristics of rice consumers, and the diets of people who consume rice. Recently available data from nationally representative surveys of food consumed by individuals in the United States allowed comparison of consumption today (2001-02) with consumption in the mid-1990s. Data come from the Continuing Survey of Food Intakes by Individuals (1994-96) and the National Health and Nutrition Examination Survey (2001-02). Rice is consumed by a significant portion of the U.S. adult population. In 2001-02, over 18 percent (18.2 percent) of adults reported eating at least half a serving of white or brown rice in one day of observed intake. This share was slightly higher than that of 1994-96 (17.4 percent). Compared with others, individuals who consumed at least half a serving of white or brown rice in the observed day of intake consumed a smaller share of calories per day from fat and saturated fat; less discretionary fat or added sugar; and more fiber, dietary folate, fruit, vegetables, and enriched grains. Consumers eating rice were more likely to eat a diet that included choices of foods consistent with the 2005 U.S. Dietary Guidelines.

Empirical Tests of Impacts of Rationing: The Case of Poland in Transition, February 2000

This study tests the theory of rationing, examining changes in household consumption behavior during the transition to a market economy in Poland, 1987–92. A model of consumption under rationing is developed and fitted to prereform quarterly data from the Polish Household Budget Survey. Virtual prices, prices at which consumers would have voluntarily chosen the rationed levels of goods, are derived for food and housing. The prereform Almost Ideal Demand System (AIDS) model with rationing is estimated. Estimates from the virtual AIDS yield plausible values for price and income elasticities. The AIDS model (without rationing) is also fitted to postreform quarterly household survey data for comparison and evaluation. When the two sets of results are compared, the impacts of rationing are consistent with the theory. Own-price elasticities for nonrationed goods are larger after the reform, and there is increased complementarity and decreased substitutability for the nonrationed goods. The results for Poland show a 75 percent decline in real household welfare over the transition and this welfare loss is one-third the value obtained using reported prices.

Dairy Markets in Asia: An Overview of Recent Findings and Implications, September 2005

This paper is an overview of important findings regarding the ongoing evolution of Asian dairy markets based on a series of new economic investigations. These investigations provide systematic empirical foundations for assessing Asian dairy markets with their new consumption patterns, changing industries, and trade prospects under different domestic and trade policy regimes. The findings are drawn from four case studies (China, India, Japan, and Korea), as well as a prospective analysis of future regional patterns of consumption and a policy analysis of trade liberalization of Asian dairy markets. The overview distills the findings of these new investigations and integrates them in the earlier economic literature; it draws policy implications and identifies lessons for countries outside of Asia, especially for emerging exporters in Latin America.

Predictable Life-Cycle Shocks, Income Risk and Consumption Inequality

Was the increase in income inequality in the US due to permanent shocks or merely to an increase in the variance of transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX repeated cross-section data on consumption and income to decompose idiosyncratic changes in income into predictable life-cycle changes, transitory and permanent shocks and estimate the contribution of each to total inequality. Our model fits the joint evolution of consumption and income inequality well and delivers two main results. First, we find that permanent changes in income explain all of the increase in inequality in the 1980s and 90s. Second, we reconcile this finding with the fact that consumption inequality did not increase much over this period. Our results support the view that many permanent changes in income are predictable for consumers, even if they look unpredictable to the econometrician, consistent with models of heterogeneous income profiles.

Exploring models for the length of stay distribution.

Diagnosis Related Groups (DRG) are frequently used to standardize the comparison of consumption variables, such as length of stay (LOS). In order to be reliable, this comparison must control for the presence of outliers, i.e. values far removed from the pattern set by the majority of the data. Indeed, outliers can distort the usual statistical summaries, such as means and variances. A common practice is to trim LOS values according to various empirical rules, but there is little theoretical support for choosing between alternative procedures. This pilot study explores the possibility of describing LOS distributions with parametric models which provide the necessary framework for the use of robust methods.

Measuring time-varying economic fears with consumption-based stochastic discount factors

This paper analyzes empirically the volatility of consumption-based stochastic discount factors as a measure of implicit economic fears by studying its relationship with future economic and stock market cycles. Time-varying economic fears seem to be well captured by the volatility of stochastic discount factors. In particular, the volatility of recursive utility-based stochastic discount factor with contemporaneous growth explains between 9 and 34 percent of future changes in industrial production at short and long horizons respectively. They also explain ex-ante uncertainty and risk aversion. However, future stock market cycles are better explained by a similar stochastic discount factor with long-run consumption growth. This specification of the stochastic discount factor presents higher volatility and lower pricing errors than the specification with contemporaneous consumption growth.

The optimum quantity of money: Theory and evidence

In this paper we propose a simple and general model for computing the Ramsey optimal inflation tax, which includes several models from the previous literature as special cases. We show that it cannot be claimed that the Friedman rule is always optimal (or always non--optimal) on theoretical grounds. The Friedman rule is optimal or not, depending on conditions related to the shape of various relevant functions. One contribution of this paper is to relate these conditions to {\it measurable} variables such as the interest rate or the consumption elasticity of money demand. We find that it tends to be optimal to tax money when there are economies of scale in the demand for money (the scale elasticity is smaller than one) and/or when money is required for the payment of consumption or wage taxes. We find that it tends to be optimal to tax money more heavily when the interest elasticity of money demand is small. We present empirical evidence on the parameters that determine the optimal inflation tax. Calibrating the model to a variety of empirical studies yields a optimal nominal interest rate of less than 1\%/year, although that finding is sensitive to the calibration.

Inequality over the business cycle: Estimating income risk using micro-data on consumption

We use CEX repeated cross-section data on consumption and income, to evaluate the nature of increased income inequality in the 1980s and 90s. We decompose unexpected changes in family income into transitory and permanent, and idiosyncratic and aggregate components, and estimate the contribution of each component to total inequality. The model we use is a linearized incomplete markets model, enriched to incorporate risk-sharing while maintaining tractability. Our estimates suggest that taking risk sharing into account is important for the model fit; that the increase in inequality in the 1980s was mainly permanent; and that inequality is driven almost entirely by idiosyncratic income risk. In addition we find no evidence for cyclical behavior of consumption risk, casting doubt on Constantinides and Duffie s (1995) explanation for the equity premium puzzle.

Heterogeneous life-cycle profiles, income risk and consumption inequality

Was the increase in income inequality in the US due to permanent shocks or merely to an increase in the variance of transitory shocks? The implications for consumption and welfare depend crucially on the answer to this question. We use CEX repeated cross-section data on consumption and income to decompose idiosyncratic changes in income into predictable life-cycle changes, transitory and permanent shocks and estimate the contribution of each to total inequality. Our model fits the joint evolution of consumption and income inequality well and delivers two main results. First, we find that permanent changes in income explain all of the increase in inequality in the 1980s and 90s. Second, we reconcile this finding with the fact that consumption inequality did not increase much over this period. Our results support the view that many permanent changes in income are predictable for consumers, even if they look unpredictable to the econometrician, consistent withmodels of heterogeneous income profiles.